A Post-Enron Lexicon for Wall Street
Much has changed in the financial world in the last few years. A three-and-a half-year bear market, corporate scandals, and technology's relentless march have left their mark -- and changed Wall Street's vocabulary. The recently published Webster's New World Finance and Investment Dictionary -- the first ever from Webster -- reflects those changes, with such additions as "Enronitis," "Wi-Fi," "digital piracy," and "special-purpose vehicle" to the financial lexicon.
Dictionary author Barbara J. Etzel hasn't limited her scope. She defines several prominent new regulations, such as Sarbanes-Oxley, Regulation Fair Disclosure (Reg FD), and the USA Patriot Act, includes some new regulatory bodies (the Public Company Accounting Oversight Board), and identifies the newly famous and infamous. Indeed, many of the people cited in this book wouldn't have made it into a pre-2000 tome: Former WorldCom Chief Financial Officer Scott Sullivan, former Smith Barney telecom analyst Jack Grubman, and New York Attorney General Eliot Spitzer, just to name a few.
Some financial terms have completely different meanings now. For example, the "big four" used to be the four biggest brokerages in Japan. Now it's the four remaining large accounting firms, after the collapse of Arthur Andersen.
What Etzel does best is provide context and background for terms most investors know well, like "accounting fraud," "bankruptcy," or "bear market." Some of her most interesting choices aren't so much new terms but ones that weren't commonly used in an investing context until recently. (See her for "cooking the books," "sham," "loophole," and "manipulation.")
This trim 270-page dictionary is a little light on the arcane terms true financial professionals would want to look up. And it has some odd inclusions, such as the definition of "barge" ("a ship that's used to carry heavy or space-intensive products") or a mini-bio of Clarence Birdseye, "originator of the frozen-food industry." But that eclectic quality is one reason students of financial markets will find this book surprisingly fun reading as well as a handy reference tool.
The following examples probably don't show up in finance and investment dictionaries that are more than five years old (and didn't appear in Houghton Mifflin's 1988 Every Investor's Guide to Wall Street Words, to name one):
• Accounting fraud: "Knowingly falsifying accounting records, such as sales or cost records, in order to boost net income or sales figures. Accounting fraud is illegal and subjects the company and the executives involved to civil lawsuits."
• Afghani: "The currency unit of Afghanistan."
• Aunt Millie: "A rude term applied to an unsophisticated investor by a market professional."
• Board independence: "A relatively new concept in corporate governance that calls for a majority of board members to be independent from the company."
• Bottom fisher: "A trader or investor who looks for bargains.... The term is borrowed from the sport of fishing and comes from fish such as catfish that sit on the bottom of a lake or river and feed on food particles and waste products that come floating down to the bottom."
• Chinese Wall: "The separation that should exist between a bank's investment banking department and its research department.... [After the market began to fall in 2000] it became apparent that the Chinese Wall had developed some gaping holes."
• Cooking the books: "A slang term that means illegally falsifying financial statements."
• Digital piracy: "The illegal trade in software, videos, digital video disks (DVDs), and music."
• Enronitis: "Nervousness over a company because of suspected accounting problems."
• Going concern: "A company that is in solid financial shape and can continue operating for the foreseeable future."
• Gunslinger: "A portfolio manager with an extremely aggressive investing style."
• Internet bubble: "The period in the late 1990s that was one of the biggest periods of market euphoria ever seen."
• Loophole: "A technicality that allows a law or tax rule to be bypassed without violating the law."
• Manipulation: "The intentional deception of investors by controlling or artificially affecting the market for a security."
• Noise: "Factors that can be cited as the reason that prices for a stock or other investments rose or fell, but that the person making the comment doesn't think had much of a substantial effect."
• Off-balance-sheet transactions: "Financial deals and arrangements that can have a material effect on a company but are structured in such a way that they do not show up on a company's balance sheet and do not affect a company's borrowing capacity."
• Severance: "A payment made by a corporation to an employee who has been laid off."
• Sham: "A transaction that is designed to trick or defraud investors."
• Wealth effect: "The tendency of consumers to spend more because the believe they are wealthier."
By Amey Stone in New York
Edited by Patricia O'Connell